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XYZ Corporation distributed to its shareholders a total of $30,000 in cash plus property that had...

XYZ Corporation distributed to its shareholders a total of $30,000 in cash plus property that had a fair market value of $80,000 and a basis of $60,000. The corporation’s earnings and profits were $100,000 on the last day of the year in which the distribution was made after taking into effect the impact on the corporation’s earning and profits of the gain recognized on the distribution (but before reducing earnings and profits by the fair market value of the distribution). How much was the total dividend income received by the shareholders as a result of the distributions made by XYZ Corporation?

Group of answer choices

$0

$90,000

$100,000

$110,000

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Answer #1

The answer is $100,000.

Corporation's earnings and profits = $100,000

Fair value of distribution = $30,000 + $80,000 = $110,000

Carrying value of distribution = $30,000 + $60,000 = $90,000

Total dividend income received by shareholders as a result of the distributions made by XYZ Corporation is Lower of

Corporation's earnings and profits $110,000 Or,

Fair value of distribution $100,000

Therefore the answer is $100,000.

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